Questions
As the controller of a medium-sized financial services company, you take pride in the accounting and...

As the controller of a medium-sized financial services company, you take pride in the accounting and internal control systems you have developed for the company. You and your staff have kept up with changes in the accounting industry and been diligent in updating the systems to meet new accounting standards. Your outside auditor, which has been reviewing the company’s books for 15 years, routinely complimented you on your thorough procedures. The passage of the Sarbanes-Oxley Act, with its emphasis on testing internal control systems, initiated several changes. You have studied the law and made adjustments to ensure you comply with the regulations, even though it has created additional work. Your auditors, however, have chosen to interpret SOX very aggressively—too much so, in your opinion. The auditors have recommended that you make costly improvements to your systems and also enlarged the scope of the audit process, raising their fees. When you question the partner in charge, he explains that the complexity of the law means that it is open to interpretation and it is better to err on the side of caution than risk noncompliance. You are not pleased with this answer, as you believe that your company is in compliance with SOX, and consider changing auditors. Using a web search tool, locate articles about this topic and then write responses to the following questions. Be sure to support your arguments and cite your sources.

Ethical Dilemma: Should you change auditors because your current one is too stringent in applying the Sarbanes-Oxley Act? What other steps could you take to resolve this situation?

nb s john

In: Accounting

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the...

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 56,000 of these balls, with the following results: Sales (56,000 balls) $ 1,400,000 Variable expenses 840,000 Contribution margin 560,000 Fixed expenses 373,000 Net operating income $ 187,000 Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $187,000, as last year? 4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs? 5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls? 6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $187,000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 56,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage.

In: Accounting

3.   On 1 July 2019 Campbell Ltd provided 1 million options to its chief executive officer....

3.   On 1 July 2019 Campbell Ltd provided 1 million options to its chief executive officer. The options were valued at $1.20 each and allowed the chief executive officer to acquire shares in Campbell Ltd for $8.40 each. The chief executive officer is not permitted to exercise the options before 30 June 2021 but may then exercise them at any time between 1 July 2021 and 30 June 2022. The market price of the Campbell Ltd shares on 1 July 2019 was $9.75.

On 31 December 2021 the share price reaches $10.78 and the chief executive officer decides to exercise her options and acquire shares in Campbell Ltd.

Required: Account for the issue and exercise of options in Campbell Ltd.

In: Accounting

A company issues $896,000 of 5-year, 5% bonds on January 1, 2021. The bonds pay interest...

A company issues $896,000 of 5-year, 5% bonds on January 1, 2021. The bonds pay interest annually.

1) Calculate the issue price of the bonds using a market rate of 4%

2) Record the bond issue

3) Prepare an effective interest amortization table for the bonds

4) Prepare the journal entries to record the first three interest payments. Ignore any year-end accruals of interest

5) Assuming the company has an October 31 year end, prepare the adjusting entry for interest on October 31, 2021.

In: Accounting

Explain the audit steps for detecting the following issues. For each of your answers provide two...

Explain the audit steps for detecting the following issues. For each of your answers provide two possible steps you could utilize to identify the item. For each, discuss what the risk may exist, and why an investor would want assurance that an auditor has covered those risks.

(e)                    Unrecorded purchase of investment securities

(f)                    Unrecorded stock compensation expense

(g)                   Unrecorded covenant violations

(h)                   Unrecorded contingent liability

In: Accounting

Lahser Corp. produces component parts for durable medical equipment manufacturers. The controller is building a master...

Lahser Corp. produces component parts for durable medical equipment manufacturers. The controller is building a master budget for the first quarter of the upcoming calendar year. Selected information from the accounting records is presented next:

a. Accounts Receivable as of January 1 are $59,200. Selling price per unit is projected to remain stable at $11 per unit throughout the budget period. Sales for the first six months of the upcoming year are budgeted to be as follows:

January $99,100
February $110,500
March $111,500
April $107,500
May $103,000
June $121,400



b. Sales are 20% cash and 80% credit. All credit sales are collected in the month following the sale.

c. Lahser Corp. has a policy that states that each month’s ending inventory of finished goods should be 10% of the following month’s sales (in units).

d. Three pounds of direct material is needed per unit at $2.30 per pound. Ending inventory of direct materials should be 20% of next month’s production needs.

e. Monthly manufacturing overhead costs are $5,650 for factory rent, $2,900 for other fixed manufacturing costs, and $1.10 per unit produced for variable manufacturing overhead. All costs are paid in the month in which they are incurred.

4. What is the budgeted direct materials cost for the first quarter? (1 point)

In: Accounting

ACT 5140 – Accounting for Decision Makers HW #1 Directions: Answer all the questions. Please submit...

ACT 5140 – Accounting for Decision Makers HW #1 Directions: Answer all the questions. Please submit your work in Word or PDF formats only. You can submit an Excel file to support calculations, but please “cut and paste” your solutions into the Word or PDF file. Be sure to show how you did your calculations. Also, please be sure to include your name at the top of the first page of your file. Question #1 • Using the accompanying financial statements (Excel Workbook), assess The Home Depot concerning liquidity, solvency, profitability, and stock performance. For each area, you should calculate the ratios from the “Ratios for Home Depot file “ and provide a brief analysis of the ratios calculated. You do not need to perform vertical analysis for this assignment. I include historical stock price information and outstanding common share information below. You do not need to look beyond the financial statements to complete this assignment. Fiscal Year Ended 2/1/2015 2/2/2014 2/3/2013 1/29/2012 Adjusted Closing Price $103.34 $74.44 $63.87 $41.67 Common Shares Outstanding (millions) 1,307 1,380 1,486 1,523 HOME DEPOT INC $ in millions Year Ending 2/1/2015 2/2/2014 2/3/2013 1/29/2012 OPERATING ACTIVITIES: Net earnings $6,345 $5,385 $4,535 $3,883 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,786 1,757 1,684 1,682 Stock-based compensation expense 225 228 218 215 Goodwill impairment (323) 0 97 0 Changes in Assets and Liabilities, net of the effects of acquisition and disposition Receivables, net (81) (15) (143) (170) Merchandise inventories (124) (455) (350) 256 Other current assets (199) (5) 93 159 Accounts payable and accrued expenses 244 605 698 422 Deferred revenue 146 75 121 (29) Income taxes payable 168 119 87 14 Deferred income taxes 159 (31) 107 170 Other long-term liabilities (152) 13 (180) (2) Other 48 (48) 8 51 Net cash provided by operating activities $8,242 $7,628 $6,975 $6,651 INVESTING ACTIVITIES: Capital expenditures (1,442) (1,389) (1,312) (1,221) Proceeds from sales of investments 323 0 0 0 Proceeds from sale of business 0 0 0 101 Payments for business acquired (200) (206) (170) (65) Proceeds from sales of property & equipment 48 88 50 56 Net cash used by investing activities ($1,271) ($1,507) ($1,432) ($1,129) FINANCING ACTIVITIES: Proceeds from short-term borrowings, net 290 0 0 0 Proceeds from long-term borrowings, net of discount 1,981 5,222 0 1,994 Repayments of long-term debt (39) (1,289) (32) (1,028) Repurchases of common stock (7,000) (8,546) (3,984) (3,470) Proceeds from sales of common stock 252 241 784 306 Cash dividends paid to stockholders (2,530) (2,243) (1,743) (1,632) Other financing activities (25) (37) (59) (218) Net cash used by financing activities ($7,071) ($6,652) ($5,034) ($4,048) Change in Cash and Cash Equivalents ($100) ($531) $509 $1,474 Effect of exchange rate changes on cash and cash equivalents (106) (34) (2) (32) Cash and cash equivalents at beginning of year 1,929 2,494 1,987 545 Cash and cash equivalents at end of year $1,723 $1,929 $2,494 $1,987 SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR Interest, net of capitalized interest $782 $639 $617 $580 Income taxes $3,435 $2,839 $2,482 $1,865 HOME DEPOT INC $ in millions Year Ending 2/1/2015 2/2/2014 2/3/2013 1/29/2012 OPERATING ACTIVITIES: Net earnings $6,345 $5,385 $4,535 $3,883 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,786 1,757 1,684 1,682 Stock-based compensation expense 225 228 218 215 Goodwill impairment (323) 0 97 0 Changes in Assets and Liabilities, net of the effects of acquisition and disposition Receivables, net (81) (15) (143) (170) Merchandise inventories (124) (455) (350) 256 Other current assets (199) (5) 93 159 Accounts payable and accrued expenses 244 605 698 422 Deferred revenue 146 75 121 (29) Income taxes payable 168 119 87 14 Deferred income taxes 159 (31) 107 170 Other long-term liabilities (152) 13 (180) (2) Other 48 (48) 8 51 Net cash provided by operating activities $8,242 $7,628 $6,975 $6,651 INVESTING ACTIVITIES: Capital expenditures (1,442) (1,389) (1,312) (1,221) Proceeds from sales of investments 323 0 0 0 Proceeds from sale of business 0 0 0 101 Payments for business acquired (200) (206) (170) (65) Proceeds from sales of property & equipment 48 88 50 56 Net cash used by investing activities ($1,271) ($1,507) ($1,432) ($1,129) FINANCING ACTIVITIES: Proceeds from short-term borrowings, net 290 0 0 0 Proceeds from long-term borrowings, net of discount 1,981 5,222 0 1,994 Repayments of long-term debt (39) (1,289) (32) (1,028) Repurchases of common stock (7,000) (8,546) (3,984) (3,470) Proceeds from sales of common stock 252 241 784 306 Cash dividends paid to stockholders (2,530) (2,243) (1,743) (1,632) Other financing activities (25) (37) (59) (218) Net cash used by financing activities ($7,071) ($6,652) ($5,034) ($4,048) Change in Cash and Cash Equivalents ($100) ($531) $509 $1,474 Effect of exchange rate changes on cash and cash equivalents (106) (34) (2) (32) Cash and cash equivalents at beginning of year 1,929 2,494 1,987 545 Cash and cash equivalents at end of year $1,723 $1,929 $2,494 $1,987 SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR Interest, net of capitalized interest $782 $639 $617 $580 Income taxes $3,435 $2,839 $2,482 $1,865 HOME DEPOT INC $ in millions Year Ending 2/1/2015 2/2/2014 2/3/2013 1/29/2012 OPERATING ACTIVITIES: Net earnings $6,345 $5,385 $4,535 $3,883 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,786 1,757 1,684 1,682 Stock-based compensation expense 225 228 218 215 Goodwill impairment (323) 0 97 0 Changes in Assets and Liabilities, net of the effects of acquisition and disposition Receivables, net (81) (15) (143) (170) Merchandise inventories (124) (455) (350) 256 Other current assets (199) (5) 93 159 Accounts payable and accrued expenses 244 605 698 422 Deferred revenue 146 75 121 (29) Income taxes payable 168 119 87 14 Deferred income taxes 159 (31) 107 170 Other long-term liabilities (152) 13 (180) (2) Other 48 (48) 8 51 Net cash provided by operating activities $8,242 $7,628 $6,975 $6,651 INVESTING ACTIVITIES: Capital expenditures (1,442) (1,389) (1,312) (1,221) Proceeds from sales of investments 323 0 0 0 Proceeds from sale of business 0 0 0 101 Payments for business acquired (200) (206) (170) (65) Proceeds from sales of property & equipment 48 88 50 56 Net cash used by investing activities ($1,271) ($1,507) ($1,432) ($1,129) FINANCING ACTIVITIES: Proceeds from short-term borrowings, net 290 0 0 0 Proceeds from long-term borrowings, net of discount 1,981 5,222 0 1,994 Repayments of long-term debt (39) (1,289) (32) (1,028) Repurchases of common stock (7,000) (8,546) (3,984) (3,470) Proceeds from sales of common stock 252 241 784 306 Cash dividends paid to stockholders (2,530) (2,243) (1,743) (1,632) Other financing activities (25) (37) (59) (218) Net cash used by financing activities ($7,071) ($6,652) ($5,034) ($4,048) Change in Cash and Cash Equivalents ($100) ($531) $509 $1,474 Effect of exchange rate changes on cash and cash equivalents (106) (34) (2) (32) Cash and cash equivalents at beginning of year 1,929 2,494 1,987 545 Cash and cash equivalents at end of year $1,723 $1,929 $2,494 $1,987 SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR Interest, net of capitalized interest $782 $639 $617 $580 Income taxes $3,435 $2,839 $2,482 $1,865

In: Accounting

No hand writing and pictures please. Illustrate the concept of ROI with suitable numerical example. How...

No hand writing and pictures please.

  1. Illustrate the concept of ROI with suitable numerical example. How ROI is different from Residual Income? Explain in your own words.

In: Accounting

roduction Budget and Direct Materials Purchases Budgets Peanut Land Inc. produces all-natural organic peanut butter. The...

roduction Budget and Direct Materials Purchases Budgets

Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The sales budget for the first four months of the year is as follows:

Unit Sales Dollar Sales ($)
January 60,000 114,000
February 65,000 123,500
March 70,000 133,000
April 46,000 87,400

Company policy requires that ending inventories for each month be 15% of next month's sales. At the beginning of January, the inventory of peanut butter is 38,000 jars.

Each jar of peanut butter needs two raw materials: 24 ounces of peanuts and one jar. Company policy requires that ending inventories of raw materials for each month be 20% of the next month's production needs. That policy was met on January 1.

Required:

1. Prepare a production budget for the first quarter of the year. Show the number of jars that should be produced each month as well as for the quarter in total.

Peanut Land Inc.
Production Budget
For the First Quarter of the Year
January February March Total
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced

Feedback

The production budget is in units. Fill in the units for sales from the amounts provided. The desired ending inventory is added to the number of units to be produced and is calculated based on future sales. Beginning inventory is subtracted to determine units to be produced. Beginning inventory is given for the first month and is carried forward from the previous month for later months.

Review the "How to Prepare a Production Budget" example in the text.

2. Prepare a direct materials purchases budget for jars for the months of January and February.

Peanut Land Inc.
Direct Materials Purchases Budget for Jars
For January and February
January February Total
Production
Jar
Jars for production
Desired ending inventory
Total needs
Less: Beginning inventory
Jars purchased

Feedback

Fill in the units produced from Requirement 1.

Production in units x Materials per unit = Direct Materials Needed for Production

The desired ending inventory for materials is added to the materials to be purchased and is calculated based on future production. Note that the percentage of desired materials inventory does not match the percentage of desired completed inventory. Beginning inventory is calculated from current month production for the first month and is carried forward from the previous month for later months.

Direct Materials Needed for Production + Direct Materials in Desired Ending Inventory – Direct Materials in Beginning Inventory = Purchases

Review the "How to Prepare a Direct Materials Purchases Budget" example in the text.

Prepare a direct materials purchases budget for peanuts for the months of January and February.

Peanut Land Inc.
Direct Materials Purchases Budget for Peanuts
For January and February
January February Total
Production
Ounces
Ounces for production
Desired ending inventory
Total needs
Less: Beginning inventory
Ounces purchased

In: Accounting

Dieckman Company makes a product with the following costs: Per Unit Per Year   Direct materials $17.90...

Dieckman Company makes a product with the following costs:

Per Unit Per Year
  Direct materials $17.90     
  Direct labor $11.20     
  Variable manufacturing overhead $3.70     
  Fixed manufacturing overhead $716,900   
  Variable selling and administrative expenses $1.00     
  Fixed selling and administrative expenses $770,000   

The company uses the absorption costing approach to cost-plus pricing described in the text. The pricing calculations are based on budgeted production and sales of 67,000 units per year.

The company has invested $370,000 in this product and expects a return on investment of 17%.

Direct labor is a variable cost in this company.
The markup on absorption cost is closest to: (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.)

77.6%

28.7%

17.0%

30.9%

In: Accounting

The December 31, 2021, adjusted trial balance for Fightin' Blue Hens Corporation is presented below.   ...

The December 31, 2021, adjusted trial balance for Fightin' Blue Hens Corporation is presented below.
  

Accounts Debit Credit
Cash $ 11,000
Accounts Receivable 140,000
Prepaid Rent 5,000
Supplies 25,000
Equipment 300,000
Accumulated Depreciation $ 125,000
Accounts Payable 11,000
Salaries Payable 10,000
Interest Payable 4,000
Notes Payable (due in two years) 30,000
Common Stock 200,000
Retained Earnings 50,000
Service Revenue 400,000
Salaries Expense 300,000
Rent Expense 15,000
Depreciation Expense 30,000
Interest Expense 4,000
Totals $ 830,000 $ 830,000

3. Prepare a classified balance sheet as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
  

In: Accounting

Using the list of accounts below, construct a chart of accounts for a merchandising business that...

Using the list of accounts below, construct a chart of accounts for a merchandising business that rents out a portion of its building, and assign account numbers and arranging the accounts in balance sheet and income statement order (“1” for assets, and so on). Each account number should have three digits. Contra accounts should be designated with a decimal of the account (100.1 for contra of account 100). Assets and liabilities should be in order of liquidity, expenses should be in alphabetical order.

Accounts Payable Equipment Sales
Accounts Receivable Interest Expense Supplies Expense
Accumulated Depr.—Equip. Land Unearned Revenue
Advertising Expense Merchandise Inventory Utilities Expense
Capital, Owner Notes Payable
Cash Office Supplies
Cost of Merchandise Sold Rent Revenue
Depreciation Expense-Equipment Salaries Expense
Drawing, Owner Salaries Payable

Acc. No Description

In: Accounting

Smith Inc. engaged in the following transactions in 2019. Jan 1 The owner invested $100,000 into...

Smith Inc. engaged in the following transactions in 2019.

Jan 1

The owner invested $100,000 into the company in exchange for 5,000 shares of no-par common stock.

Jan 1

Purchased a computer system for $40,000.  

Jan 14

Purchased $1,200 of supplies on account.

Feb 25

Invoiced clients for services provided on account, $36,000.

Mar 31

Paid rent for two years, $19,200.

April 1

The company borrowed $50,000 from Bank of America.

May 14

Collected $11,500 on account.

June 1

Purchase a delivery van to delivery copies to customers, the van had a purchase price of $53,000, taxes on the van were $5,000 and document charges of $1,500 were paid.

July 31

Paid $800 on account for supplies purchased on January 14.

Aug 10

Received cash for services provided, $10,200.

Sept 1

Paid utilities of $4,000.

Oct 1

Received $30,000 in advance for services to be provided in the future.

Nov 15

Paid for an ad in the local newspaper, $1,500.

Nov 27

Processed employee payroll and employer taxes, gross earnings were $4,000.

Nov 30

Paid the employee salaries, taxes are not due until January.

Dec 15

The company declared and paid $6,000 in dividends.

Dec 30

Invoiced clients for services performed totaling $8,500.

Dec 27

Processed employee payroll and employer taxes, gross earnings were $4,000.

Dec 30

Paid the employee salaries, taxes are not due until January.

Smith Inc. Journal General – External Transactions                                             

Date

Account Name

Debit

Credit

In: Accounting

Please explain the answer step by step: Computing Average Unit Costs The total monthly operating costs...

Please explain the answer step by step:

Computing Average Unit Costs
The total monthly operating costs of Chili To Go are:

$8,000+ $0.30X

where

X = servings of chili

(a) Determine the average cost per serving at each of the following monthly volumes: 100; 1,000; 5,000; and 10,000.

Round answers to one decimal place.

Volume Average Unit Cost
100 $Answer
1,000 $Answer
5,000 $Answer
10,000 $Answer

(b) Determine the monthly volume at which the average cost per serving is $0.70.
Answer servings of chili

In: Accounting

PLEASE EXPLAIN THE ANSWER STEP BY STEP Automatic versus Manual Processing Photo Station Company operates a...

PLEASE EXPLAIN THE ANSWER STEP BY STEP

Automatic versus Manual Processing
Photo Station Company operates a printing service for customers with digital cameras. The current service, which requires employees to download photos from customer cameras, has monthly operating costs of $5,000 plus $0.20 per photo printed. Management is evaluating the desirability of acquiring a machine that will allow customers to download and make prints without employee assistance. If the machine is acquired, the monthly fixed costs will increase to $10,000 and the variable costs of printing a photo will decline to $0.04 per photo.

(a) Determine the total costs of printing 20,000 and 50,000 photos per month.

Units Current Process Proposed Process
20,000 $Answer $Answer
50,000 $Answer $Answer

(b) Determine the monthly volume at which the proposed process becomes preferable to the current process.
Answer

units

In: Accounting